department for Environment, Food and Rural Affairs

Debate between Brian H. Donohoe and James Paice

Tuesday 17th July 2012 Commons Chamber

[Mr Donohoe]

Iceland.

[Mr Paice]

It is on the record, and I did not move my lips.

The reality is that such a price is completely unsustainable. Such retailers need to understand that if they go on like that, there will be no milk. There is a limit to cost cutting. Maybe some producers can cut their costs, but not to that level. It is completely impossible. There is no country in the world that can sell bottled milk at the equivalent of 25p a pint by the time it has been through the whole processing chain. That is absurd, and such retailers are biting off their nose to spite their face.

The final issue that several hon. Members raised was the lack of producer power and the need to promote producer organisations. That brings me to the dairy package and the voluntary code. I am grateful to Members of all parties for the support that they have expressed this afternoon for my work in trying to get a voluntary code. I genuinely believe that that offers a far better prospect than legislation, and I shall explain why.

A voluntary code can, if agreed by both sides—the processors and the producers—cover such issues as price, notice periods, contract lengths, volume and exclusivity. A raft of other points could be included if both sides wanted them to be. Conversely, the dairy package and the legislation that would be permissible under it are about a contract, not a code. We could legislate to make contracts compulsory, but the permitted legislation would limit greatly what could be put into those contracts.

For example, as we understand it, no notice period would be permitted. A length of contract would be specified, and it would probably be a year or more. The idea of a short notice period to get out of a contract would not exist. That is just one of many examples showing that the regulatory route, which I fully accept appeals to some people, is not as good as a code, which could accommodate a range of measures.

I agree with farmers and others who said last week that we cannot go on like this, because the discussions on a code have now taken 14 months and we cannot continue simply hoping it will happen. I had a meeting with both sides last week before the public meeting to which reference has been made. We got very close to an agreement, but both sides still had what I considered to be very minor issues to resolve. Those issues were obviously important to them, and they were not resolved. There have been further, private discussions with my officials and others over the past few days, and I intend to precipitate a final decision. I do not want to give the House more information than I have given the industry, because that would not be right, but I intend to say that enough is enough, that the negotiations have been going on long enough and that it is time for both sides of the industry to show some maturity and demonstrate that they can agree a voluntary code of practice.

I would be foolish to pretend that it is a certainty that we will get a code. There are still some stumbling blocks on both sides, coming both from those representing producers and from at least one major processor. However, I have every intention of driving the process forward and getting a result. We have got to the point at which knowing it was not going to happen would be better than living in the never-never land that we have been in for some time. However, I emphasise that I do not believe that the regulatory approach recommended by some hon. Members would give either side of the industry anything like the beneficial future that is there for the taking.

I hope I have answered the points raised by hon. Members in the debate. I entirely share their concerns. I can assure the right hon. Member for Delyn (Mr Hanson) that we are in discussions with colleagues in the devolved Administrations. We are getting together prior to the Royal Welsh show this weekend. We were going to discuss the common agricultural policy, but we will also discuss the situation in the dairy sector. I can only hope that, before the cuts take place on 1 August, we can get a voluntary code at least. I hope others agree that that is the best way forward.